2012 (4) TMI 668 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Notice dated 14.09.2009 u/s 147/148 of the Income Tax Act, 1961.
2. Whether the re-assessment proceedings initiated were based on a change of opinion.

Summary:

Issue 1: Validity of the Notice dated 14.09.2009 u/s 147/148 of the Income Tax Act, 1961
Vatika Limited challenged the Notice dated 14.09.2009 issued u/s 147/148 of the Income Tax Act, 1961, and the subsequent order dated 02.12.2010 by the Assessing Officer rejecting the objections raised by the petitioner. The Assessing Officer had recorded reasons to believe that income amounting to Rs. 377.44 lakhs had escaped assessment due to the forfeiture of Rs. 3,53,76,361/- being treated as capital expenditure, which is not allowable. The second reason regarding bad debt of Rs. 23,68,182/- was not pressed by the Revenue and was accepted by the Assessing Officer.

Issue 2: Whether the re-assessment proceedings initiated were based on a change of opinion
The court examined whether the re-assessment proceedings were valid or merely a change of opinion. During the original assessment proceedings, the issue of forfeiture of Rs. 3,53,76,361/- was specifically examined and verified by the Assessing Officer, who accepted the petitioner's stand. The court noted that the entire facts and background were explained and justified during the original assessment, and no addition was made on this ground in the assessment order dated 31.12.2007. The court held that this constituted a change of opinion, which cannot be a ground for initiating re-assessment proceedings as per the Full Bench decision in CIT v. Kelvinator of India Ltd., (2002) 256 ITR 1, and affirmed by the Supreme Court in CIT v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC).

The court emphasized that mere doubt or suspicion without any tangible material cannot justify re-opening. The Assessing Officer did not conduct verification or inquiries to show that the explanation given by the petitioner was false. Therefore, the reasons to believe were found to be insufficient.

Conclusion:
A Writ of Certiorari was issued quashing the Notice dated 14.09.2009. Consequently, any re-assessment order passed by the Assessing Officer was treated as void. There was no order as to costs.